HMRC's new RTI system for PAYE tax is not Really That Impressive

If you had spent £270 million on a shiny new computer system, you’d expect to see some kind of return for your money wouldn’t you? Time savings through efficiency, say, or a reduced number of errors than in the system it replaced? Unfortunately this is HMRC we are talking about, and their expensive new Real Time Information (RTI) system has not only caused headaches for employers, it’s also ended up with more taxpayers paying the wrong amount of tax. Great job.

The 5.5 million errors HMRC is estimating for 2013-14 is higher than the 5.2 million in the previous year, with an estimated 3.5 million people ending up owing the taxman more money, and having to pay it off through next year’s salary. Two million can claim a rebate as they have had too much tax taken from them every month.

HM Revenue and Customs has started writing to around 5.5 million taxpayers to tell them they paid the wrong amount of tax through PAYE last year, with the average error estimated at around £300.

Last year, the Treasury told MPs that RTI would “bring PAYE into the 21st century” and make it more accurate for both employers and HMRC. Under the RTI system employers report wage payments to HMRC on a weekly or monthly basis, meaning HMRC should have completely accurate and up to date information, reducing the occasion for errors. Or so we thought.

Accountants said the increase in errors in the tax system showed that RTI was not working as promised, suggesting that the data being fed into the new system was often flawed. Employment tax expert David Heaton of Baker Tilly, said: “RTI was supposed to make PAYE more accurate, not less. So why are there more [errors] this year, with RTI in full flow, than last year, when RTI was only a pilot? The number of PAYE differences has risen, not fallen. Something in RTI is not working.”

HMRC declined to shoulder any of the blame, saying instead that the increase in corrections was largely down to an increase in the number of people in employment that has come with the recovering economy. So it’s actually our fault for having jobs. Great work everyone.